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NS – I Income Bonds to pay more interest, income bonds.#Income #bonds

NS I Income Bonds to pay more interest

Those with less than £25,000 in the bonds will see their interest rate rise by 0.3 of a percentage point, from 1.45pc to 1.75pc.

The move follows a rise in NS I’s Isa rates in January and bucks the trend of falling returns for savers following the introduction of a state-backed scheme to give banks access to cheap loans.

The change will see a saver with £24,000 in Income Bonds receive £72 a year more in interest.

The improvement comes as a result of a programme to simplify NS I’s products. Previously Income Bonds paid tiered interest rates 1.45pc on balances of less than £25,000 and 1.75pc above. Now the higher rate will be paid on all balances between the minimum and maximum allowed, £500 to £1m.

Interest on Income Bonds is taxable but paid gross, which can be attractive to non-taxpayers because they are spared the inconvenience of reclaiming tax. As a result they have proved popular with many pensioners.

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Income Bond holders can now manage accounts by phone and online, while bond certificates detailing investments have been replaced by statements.

All Income Bonds holders will be sent a leaflet outlining the changes with their annual statement which will be sent before the end of May.

In January NS I increased the interest rate for Isa savers when it announced that it would automatically switch customers in its older Cash Isa account into the new Direct Isa, which pays a far more competitive rate of interest.

The state-owned organisation’s 94,000 customers in its T Cash Isa (which was for those who had previously had Tessas) and its Cash Isa will see rates rise from 0.5pc to 2.25pc after the switch, which will take place next month.

It had less good news at the time of the Budget for savers hoping for a return of its inflation-linked savings certificates. After the Chancellor announced that NS I’s net financing target would be zero for the 2013/14 tax year, the organisation said it did “not anticipate being able to return Index-linked Savings Certificates to general sale in 2013/14”.